Supply Chain Role Grows In AOG Events

It is to the Playbook that United Airlines aircraft-on-ground (AOG) teams turn to get aircraft back in the air. Similar to a football team's game plan, the Playbook is an electronic list of the partner airlines, parts suppliers and logistics providers that support United around the world.

“Domestically, an AOG is pretty straightforward,” says Pete Rosa, director for United AOG operations. “When you're flying internationally and dealing with customs, it's much more complicated.”

United's Playbook highlights how AOG work is morphing from a maintenance event to a supply-chain event.

“To make money on airplanes, you have to keep them flying,” says Al Koszarek, president and CEO of Aeroxchange. “Because it is financially unsustainable for an airline to put all the inventory it might need at every place it flies, sharing, collaboration and a logistics network have become the silver bullet in the AOG world.”

That is especially true as airlines shrink their fleets and reduce investments in spare parts and components. “With smaller fleets, a plane that's out of service for a day or two has a real impact on schedules,” says Brian Prentice, a partner at Oliver Wyman. As a result, AOG work is maturing as a process. “Airlines are putting more formalized pooling agreements in place,” he says. “They are becoming more structured about insuring that their sources of parts are open and available. And they are adding more supply-chain tools to their kit.”

In one sense, an AOG event is a simple process. When an aircraft goes out of service, a mechanic notifies an airline's maintenance control center of the reason. At that point, the AOG team goes into action. The team looks first to see whether the airline has the needed part in stock and can send it to a mechanic in a timely fashion. If not, it determines how best to source the part and arrange for its transportation and delivery. That may involve putting the part on the next scheduled flight or having it carried by a courier.

What differentiates an AOG situation from a routine maintenance event is urgency. The AOG motto at United is: “Five minutes makes a difference.” “Essentially, the AOG operations team is the last line of defense,” says Rosa. “Our direct focus is to minimize any service disruptions to the passenger.”

Air Canada follows a similar approach. The airline's fleet is tracked from a centralized maintenance center where the AOG team is headquartered. “We have maintenance coordinators, an engineering support group and a maintenance planning group,” says Mark Bentley, manager of commercial project integration. “If a hangar or manpower is required, or if we need to procure parts and materials, there are teams to support those as well.”

Traditionally, AOG work has been a relationship-based business where one airline scratches another's back. “There is a real camaraderie between the AOG desks because we are all vulnerable,” says Bentley. “We are all competitors, but we support one another.”

While relationships still count, airlines are increasingly bringing a prepare-and-execute structure to enable those relationships. “The most effective AOG desks are the ones that plan up-front so that when an event occurs, they have a script they can execute,” Prentice says. “It's all about pre-planning the recovery options.”

AOG professionals say that you cannot plan for an AOG event. But you can prepare a response. “An AOG is inherently an unplanned event,” says John Avery, director of supply-chain solutions for AJ Walter. “But you do know some things that you can prepare for. You know what aircraft you are going to fly and you know to what locations you are going to fly.”

Based on those two factors, airlines determine what parts they need to have where, whether they should own or borrow them and how they are going to move them in an emergency.

Air Canada starts the process with a list of the parts identified on the aircraft manufacturers' essentiality required parts. That list is augmented by reviewing the airline's past history, including the frequency at which specific parts were required for an AOG priority. In addition, Air Canada considers the impact on operations of seasonal changes, such as cold weather. Finally, it considers whether the aircraft flies a route on a regular or seasonal basis.

“Many of our routes and equipment change by season,” Bentley says. “We will either reposition our essentiality required parts, or we will tell our pool partners that we're now flying a different fleet type and renegotiate the pool.” If necessary, he adds, they may also have to match mechanics, ground-handling equipment and facilities to the equipment flying to a route.

Once the list of required parts and locations has been determined, there are at least four approaches to sourcing materials:

•Stock a range of critical parts at the locations where the airline flies the most, especially at hub locations.

•Participate in an industry pool organized at meetings of the International Airline Technical Pool. “An airline like British Airways might offer to be the pool provider for a range of part numbers at Heathrow [Airport], and a number of airlines will join that pool,” explains Avery. “A formula determines the cost for sharing that part among the people in the pool.”

•Develop a bilateral loan and borrowing agreement between two airlines stating that they will coordinate the provisioning of parts at a discounted rate. Air Canada or United may negotiate commercial terms with British Airways for access to parts at Heathrow or with Lufthansa in Germany. In return, they will provide access to parts under similar terms at locations in the U.S. or Canada.

•When all else fails, fall back on the kindness of other airlines, original equipment manufacturers and distributors. “If an aircraft is stuck and the only part is from a non-approved supplier, rules for strategic procurement are irrelevant if the part is airworthy,” says Avery.

While an AOG is still a relationship-based event, technology is streamlining the process. “Ten or 15 years ago, I went through a Rolodex to try to find an airline that could help me when I was on the ground in a specific location,” says Bentley. “Today, we share our parts catalog electronically with our partners and we're able to see each others' available inventory.”

Air Canada relies on AeroAOG, the parts search engine and trading platform from Aeroxchange. The tool allows a participating airline to enter the AOG location, the part number needed as well as a proximity search to determine where the nearest parts are. “Once you've identified a source, you can begin working the phone lines, call a partner and propose a transaction,” says Koszarek.

AeroAOG is also designed to manage the terms of a loan-and-borrowing relationship electronically. “The transaction may begin as a loan and close as a purchase or begin as a loan and close as an exchange,” Koszarek says. “The system allows you to manage the transaction as it occurs.”

Technology is also playing a role in the transportation of the part. Logistics providers such as B&H Worldwide push updates on the progress of critical parts out to their airline and MRO customers (AW&ST MRO Edition, Feb. 11, p. MRO14). DB Schenkeraeroparts, for instance, staffs AOG desks on a 24/7 basis at 36 locations around the world. Once the source location for a part is identified, DB Schenker's system provides full visibility into the progress of every shipment, including transit time calculations and traffic lights that illustrate real-time milestone status.

United is taking that concept one step further and creating an internal system to scan and track its AOG shipments. “The idea is to scan the AOG part onto an aircraft and then track it in our system, similar to how we track passenger bags,” says Rosa. The airline is exploring ways to track the part within the warehouse as well.

Although many AOG practices have been in place for years, new strategies to source materials are emerging.

United is considering the potential of new inventory-management arrangements and partnerships to reduce inventory costs. “We are looking at several different parts providers that can place inventory on consignment in certain locations,” says Rosa. “We have not entered into an agreement yet, but we are looking at the model.”

AJ Walter, for instance, has developed a consignment model in which it owns parts that are boxed and ready for use but are stored at an airline's facility near the production line. “We own the parts, but the airline controls them,” Avery says. One carrier has used this service to provide inventory at locations where it flies on a seasonal basis.

Prentice expects airlines to take a harder look at the use of surplus parts in AOG situations. In Oliver Wyman's most recent MRO survey, two-thirds of the airlines responding report﻿ that they expect to moderately or greatly increase the use of surplus parts. However, three-quarters say the primary hindrance is the location of the parts.

“Airlines would love to use more surplus parts in an AOG situation, but getting a part off an airplane in the desert isn't practical,” Prentice says. “As airlines, MROs and secondary providers develop that market, surplus parts will become a bigger part of the solution.”

The new models illustrate the need to continually improve the AOG supply chain. “AOG situations aren't ever going to go away,” says Air Canada's Bentley. “Airlines have to keep streamlining their processes, understanding the maintenance on their aircraft and looking for opportunities to minimize the time for a repair. We have to continue to innovate to stay up with what's happening in an aircraft.”